Pipeline Issues Dominate Natural Gas Industry Needs/say Graves, House

Pipeline Issues Dominate Natural Gas Industry Needs/say Graves, House

Article excerpt

WASHINGTON, D.C. - The lack of accessible and reasonably-priced
pipeline transportation is the dominant problem in the U.S. natural
gas industry, two spokesmen for the Oklahoma Independent Petroleum
Association (OIPA) told a U.S. Senate committee Tuesday.

U.S. Energy Secretary John S. Herrington, meanwhile, told the
Senate Energy and Natural Resources Committee it should approve a
controversial natural gas decontrol proposal even though the
administration-backed measure faces strong opposition on the Senate
floor and in the House.

Sen. Don Nickles, R-Okla., is a member of the committee. It is
chaired by Sen. James A. McClure, R-Ohio.

Jack Graves, OIPA president, and David House, chairman of the
association's natural gas policy committee, both of Tulsa, asked the
committee to concentrate on transportation problems despite
expressing support for complete decontrol of natural gas wellhead
prices and for repeal of the 1978 Powerplant and Industrial Fuel Use
Act.

Both Graves and House, who represent 1,500 Oklahoma independent
producers, said decontrol would not be acceptable to producers if it
required existing contracts with pipelines.

"Unrestricted access to reasonably-priced transportation is the
gas industry's number one priority," said Graves, president of
Tulsa-based Calumet Oil Co.

"Excessive tariffs," he said, "inhibit producers' ability to
deliver adequate supplies of gas to consumers. Order 436 by the
Federal Energy Regulatory Commission (FERC) was purported to be a
majorstep toward open access transportation. But it has been negated
by a series of regressive steps which have exacerbated the disruption
in the industry."

House, who is vice president-administration for Tulsa's Samson
Resources Corp., said tariffs and conditions proposed by the
pipelines are generally so restrictive that they "really discourage,
not encourage, transportation.

"Pipelines certainly have every right to protect their system, but
penalties of $5 and $10 (for small) imbalances are unduly restrictive
and, in fact, discriminatory," he added. "The lack of
nondiscriminatory and truly open access hinders many willing buyers
and sellers today."

Graves said wellhead price controls on gas, which have been
completely or partially in place since passage of the 1978 Natural
Gas Policy Act, "alternatively punish producers of old gas
(discoveredprior to the law's enactment) and producers of new gas.

"The NGPA (Natural Gas Policy Act) gave incentives to find new gas
and severely limited the potential revenue from sales of old gas," he
said. "Now, the block billing portion of Order 423, if it goes into
effect as scheduled, will force new gas, which is more expensive to
find, to take a back seat in favor of old gas."

The OIPA endorsed a bill, introduced by Nickles, to decontrol all
wellhead prices. It gave qualified support to a bill by McClure,
which represents President Ronald Reagan's decontrol plan, because
the bill calls for contract abrogation. …